Dell shareholders show disdain for CEO

By Aaron Smith, CNNMoney.com staff writerAugust 18, 2010: 9:54 AM ET

NEW YORK (CNNMoney.com) -- One quarter of Dell shareholders showed their disdain for Michael Dell, founder and chief executive, by withholding support just weeks after the computer maker settled a fraud case with the SEC.

In a filing to the Securities and Exchange Commission on Tuesday, Dell (DELL, Fortune 500) revealed that voters controlling 378 million shares withheld support for the CEO. Those controlling 1.13 billion shares voted in favor of him.

Among the 11 directors at Dell, Michael Dell received the lowest number of supporting votes.

But Dell spokesman David Frink maintained the company's confidence in its CEO. "The Dell board of directors has reaffirmed its unanimous support for Mr. Dell's continued leadership, and a majority of shareholders agreed," he said.

The filing came out just days before Dell is scheduled to report quarterly results on Thursday, and just weeks after the company agreed to pay a $100 million fine to settle fraud charges with the SEC.

That settlement, announced July 23, ended a five-year case that has plagued the company and its chief executive. The SEC accused Dell of not disclosing to its investors "large exclusivity payments" made to the company by chipmaker Intel (INTC, Fortune 500), as part of an agreement that Dell not use chips made by rival AMD (AMD, Fortune 500).

The payments were large enough to make up 76% of Dell's operating income in the first quarter of 2007, as well as double-digit percentages of earnings in other quarters.

In a separate legal battle, Web services company Advanced Internet Technologies has accused Dell, in an Aug. 13 filing to a U.S. district court in North Carolina, of refusing to comply with court orders to reveal secret documents in a dispute over faulty computers.

Advanced Internet Technologies has sued Dell for damages from the breakdown of nearly 2,000 OptiPlex systems it leased to clients. The company said it lost nearly $16 million from cancelled contracts and $22 million on discounts it offered to hold onto spurned customers.

On Thursday, Dell is expected to announce second-quarter revenue of $15.2 billion, a 19% gain from the year-earlier quarter, and earnings of 30 cents per share, a gain of 3%.

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